MNI BRIEF: Japan Business Expects Solid Inflation - BOJ Tankan

MNI (TOKYO) - The Bank of Japan's closely watched five-year Japanese firm inflation expectations, in addition to the one- and three year view, held above 2% over Q3, the BOJ September Tankan survey released on Tuesday showed, supporting the central bank’s view that the country's ingrained deflationary mindset is shifting. 

On average, companies saw the annual consumer inflation rate at 2.4% in September, unchanged from Q2's read. They also expect a rise of 2.3% three years ahead and a 2.2% increase in five years, both unchanged from three months ago. 

The survey showed companies on average expect sales prices to rise 2.8% a year from now, unchanged from 2.8% in June, and an increase of 4.1% three years ahead, unchanged from Q2. Expectation over five years, however, jumped 10 basis points to 4.9%.

Goods prices on 2,911 items are set to be raised in October, up from 2,897 items in April, the Teikoku Data Bank said on Monday.

The result will encourage BOJ officials focused on how pass-through of cost increases, including high labour costs, is impacting retail prices in October. BOJ Governor Kazuo Ueda has said he will pay strong attention to service inflation data for October, when Japanese companies typically make biannual revisions to prices for goods and services. (See MNI BOJ WATCH: Ueda Says BOJ Has Time To Watch Price Moves)

The results showed corporate appetite to raise retail prices on the back of high labour costs, which in turn will strengthen the relationship between wages and prices.